If you are thinking about opening a line of credit, you’re probably doing research about your credit score. But with so much information out there, it can be hard to know where to look.
Are you supposed to look at your FICO score or your credit score? Which one matters the most?
We wrote this article to help walk you through the differences between a FICO score vs credit score. Read on to learn more.
FICO Score vs Credit Score
FICO scores are used most commonly be lenders. However, there are other scores out there that can help you figure out where your credit is.
Other than FICO, there are a few other companies that use scoring methods to determine credit scores. One of the common credit scoring models, aside from FICO, is the VantageScore model.
FICO and VantageScore look at many of the same factors, but they differ just a little. And your credit scores will look different depending on which scoring model the company used and which credit bureau they got your information from.
A Bit About FICO Scores
In 1989, lenders began using FICO credit scores and since then the company changed its scoring methods many times. And, accord to FICO, today over 90% of lenders use FICO scores when deciding on whether or not a consumer is a safe choice.
FICO offers industry-specific scoring methods in addition to the base versions, like those for car loans, credit cards, and mortgages. This means that the score your mortgage company has and the score your car company has for you are going to be different.
FICO scores range from 300 to 850, and it takes the following factors into consideration when giving you your final score:
- Payment history: 35%
- Amount owed: 30%
- Length of history: 15%
- New credit: 10%
- Credit mix: 10%
Different scores mean different things. FICO generally defines different credit ratings like this:
- 800+: exceptional
- 740-799: very good
- 670-738: good
- 580-669: fair
- 579 or lower: poor
Industry-specific scores have a range from 250-900 and they’re tailored depending on the line of credit you intend to open.
Each one of the different FICO versions uses unique formulas that cater to the different kinds of creditors as we mentioned.
That means that if you had a car repossessed or missed a payment on your car loan, your FICO Auto Score will weigh those factors more heavily than your base score.
You can get a hold of your FICO score through different card issuers or a number of other tools as well.
Now Onto VantageScore
In 2006, Equifax, Experian, and TransUnion started a joint venture in order to provide consumers with a more diverse and fast-acting credit score.
While FICO requires you to have an account open for six or more months, and one account reporting to the bureaus within the last six months to get your score, VantageScore wants to give you your credit score with just one month of history.
VantageScore claims that over 2,200 institutions use their system when checking credit scores, and they’re based on the following factors:
- Payment history: incredibly influential
- Age and credit type: highly influential
- Credit limit used: highly influential
- Rational of debt: moderately influential
- Recent behavior: less influential
- Available credit: less influential
Those factors are roughly the same as FICO scores, right?
The ranges of credit score quality are a bit different, though.
- 750-850: excellent
- 700-749: good
- 640-699: fair
- 300-639: needs work
VantageScore runs from 300-850 and they are also constantly updating their scoring practices.
Proprietary Scoring Models
Just like FICO and VantageScore, the credit bureaus also have their own proprietary credit scores. But because lenders don’t use these when making decisions about credit, they’re called “educational scores.”
Why Are They So Different?
FICO and VantageScore are just two scores on the tip of the iceberg. There are dozens of other credit scores out there.
While all of these companies score your credit in a different way, they all place their focus on how responsible you are with the money that you borrow.
There are a couple of reasons why your scores are different.
Some scores are going to be from different dates. Your credit score is constantly changing, so make sure that you checked all of your scores on the same date to get the most accurate comparison.
Also, your credit scores are calculated with different scoring systems. These are proprietary, so we don’t know what they are exactly, but they are all just a little bit different.
Scores are also calculated with different reports. If your lender only reports to one of the three bureaus, some credit agencies could be missing some information.
You have to check your credit report for errors over time. It is unbelievably common for people to get their credit report and find that it is filled with errors.
So, Which Is Better?
Truthfully, no one credit score is better or worse than the other. They are all different, and different lenders use different scores.
However, most of the leading United States lenders use FICO credit scores, so they might influence your financial life a little more than the others.
The Final Score
In the FICO score vs credit score debate, it’s important to remember that they’re all different but equally important in some way.
It’s hard to keep all of your different credit scores in mind because there’s just so many out there and they’re all changing constantly. But, as long as you focus on repaying your debts and keeping a healthy line of credit open, your scores should all remain healthy.
Just remember to check them yearly to ensure that you haven’t missed something or that the reports aren’t incorrect.
For more information about improving your credit score, visit us today!